Correlation Between WHA Public and President Bakery

Can any of the company-specific risk be diversified away by investing in both WHA Public and President Bakery at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining WHA Public and President Bakery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WHA Public and President Bakery Public, you can compare the effects of market volatilities on WHA Public and President Bakery and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in WHA Public with a short position of President Bakery. Check out your portfolio center. Please also check ongoing floating volatility patterns of WHA Public and President Bakery.

Diversification Opportunities for WHA Public and President Bakery

0.28

Correlation Coefficient

WHA Public  President Bakery

Modest diversification

The 3 months correlation between WHA and President is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding WHA Public and President Bakery Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Bakery Public and WHA Public is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on WHA Public are associated (or correlated) with President Bakery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Bakery Public has no effect on the direction of WHA Public i.e., WHA Public and President Bakery go up and down completely randomly.

Pair Corralation between WHA Public and President Bakery

Assuming the 90 days trading horizon WHA Public is expected to under-perform the President Bakery. In addition to that, WHA Public is 2.2 times more volatile than President Bakery Public. It trades about -0.14 of its total potential returns per unit of risk. President Bakery Public is currently generating about 0.0 per unit of volatility. If you would invest  5,975  in President Bakery Public on September 28, 2024 and sell it today you would earn a total of  0.00  from holding President Bakery Public or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

WHA Public  vs.  President Bakery Public

WHA Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WHA Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, WHA Public sustained solid returns over the last few months and may actually be approaching a breakup point.

President Bakery Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Bakery Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, President Bakery is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WHA Public and President Bakery

The main advantage of trading using opposite WHA Public and President Bakery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WHA Public position performs unexpectedly, President Bakery can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in President Bakery will offset losses from the drop in President Bakery's long position.

The idea behind WHA Public and President Bakery Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.